Would you buy a home today?

Buyers of new homes in February plunged to their lowest level in nearly a half century of record keeping, the Associated Press reported this morning, in a sign that the housing market remains in tatters.

AP notes that new homes are selling at an annual rate of 250,000, far below the 700,000 that economists consider healthy. And the report comes only two days after the National Association of Realtors said sales of existing homes in February didn’t fare much better.

It is the latest in a steady stream of horrific news for the real estate industry in the three years since former President Bush visited Novadebt, a credit counselor in Freehold Township, and encouraged lenders to work with home owners who had exotic mortgages and keep them in their homes.

By then, it was too late. Home owners’ wages weren’t keeping up with their mortgage payments, sending them into default. Their lenders had sold their mortgages to Wall Street long ago. Wall Street dumped them on investors. When the mortgages weren’t worth anything, lenders tried to collect insurance. And there wasn’t enough money in the world to cover it.

The stock market collapsed. Credit froze. Companies laid off workers. Workers couldn’t make their mortgage payments, even though new President Obama encouraged lenders to work with home owners to keep them in their homes.

Throw in a slow recovery in the job market and a delay in foreclosures because lenders cut legal corners, and, well, I guess that brings us to where we are.

What hasn’t been measured is the damage caused to the psyche of potential buyers. There was a time when home ownership was equated with the American dream. When common wisdom held that a home was the best investment you could make. That renters were “throwing their money away.”

But lately it feels like that is being called into question. Home ownership now seems like an impediment, particularly if you get laid off and need to relocate. Prices, which always rose, now have proven they can fall. And when your dishwasher breaks, you can’t simply call your landlord to fix it.

When an industry loses consumer’s confidence, it is hard to recover.

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About Michael Diamond

Michael L. Diamond is a business writer at the Asbury Park Press, covering workforce and the economy. He worked at newspapers in Pennsylvania and California before joining the Press in 1999.

Buying a house is not an investment. It’s a place to live. I can make my money work for me in better places than a home. I’m not talking about rental real estate. The money for up keep, interest and the daily living is not a bargain.

Paybacks a bitch. The corrupt bargain made between mortgage companies, real estate investors, developers, and investment banks will haunt us for many years to come. Unfortunately, they’ve made their money and the rest of us are paying for it.

Slowly people are coming around to the idea that maybe housing won’t ever get back to where it was. Why should it? It’s facing tough headwinds…

* A 30 year slow decline in interest rates This helped push up prices over the years. I can’t see rates going much lower from here – unless we go negative.

* Demographic changes. Consider these facts: the average age of a homeowner buying his most expensive home is 45, and the apex of the baby boomer births happened in 1961. That fueled prices right up to…2006. Now that baby boomer demand is going away. This will accelerate as boomers retire.

* Goosing of the RE market in the last five years of the bubble… stopped abruptly. In the early part of the last decade, the gubmint declared war on mortgage lending standards – giving rise to liar loans, zero down, and even NINJA loans. Like ALL government efforts to make buying a home more affordable, it made homes LESS affordable by boosting demand and making money easier to borrow. All that artificial demand is gone.

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Michael DiamondMichael L. Diamond is a business writer at the Asbury Park Press, covering workforce and the economy. He worked at newspapers in Pennsylvania and California before joining the Press in 1999.E-mail Michael